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SPV-LS, LLC v. Transamerica Life Insurance Co.

United States District Court, D. South Dakota, Southern Division

April 5, 2017

SPV-LS, LLC, Plaintiff,
v.
TRANSAMERICA LIFE INSURANCE COMPANY, Defendant and Third-Party Plaintiff,
v.
NACHMAN BERGMAN, as Trustee of The N Bergman Insurance Trust dated December 18, 2006; MALKA SILBERMAN, as Successor Trustee of The N Bergman Insurance Trust dated December 18, 2016; LIFE TRADING TRUST, dated August 8, 2007; T-LEG LLC, a/k/a TLEG LLC; FINANCIAL LIFE SERVICES, LLC; SPVII, LLC; and THE REPRESENTATIVE OF THE ESTATE OF NANCY BERGMAN, Third-Party Defendants.

          MEMORANDUM OPINION AND ORDER ON PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT

          Lawrence L. Piersol United States District Judge

         Pending before the Court is Plaintiff SPV-LS, LLC's ("SPV") Motion for Summary Judgment dismissing claims and cross-claims by Nachman Bergman and Malka Silberman, as trustee and successor trustee of The N Bergman Insurance Trust dated December 18, 2006 ("the Trust"). Doc. 462. The Trust did not respond to the motion.[1] Pursuant to Rule 56.1(D) of the Local Rules for the United States District Court for the District of South Dakota, if the non-moving party fails to respond to the moving party's statement of material facts, "all material facts set forth in the movant's statement of material facts will be deemed admitted." L.R. 56.1(D). This Court has previously held, however, that a failure to respond to a summary judgment motion may not automatically compel a resolution in favor of a moving party. See Midland Nat. Life Ins. Co. v. Gonzales, 2010 WL 2556869, at *1 (D.S.D. June 23, 2010); see also Interstate Power Co. v. Kansas City Power & Light Co., 992 F.2d 804, 807 (8th Cir. 1993) (finding that "[e]ven if a motion for summary judgment on a particular claims stands unopposed, the district court must still determine that the moving party is entitled to judgment as a matter of law on that claim."). As such, this Court will determine, based on the record before it, whether the entry of summary judgment is appropriate.

         The Court has considered all filings on record and for the following reasons the motion is granted.

         FACTUAL BACKGROUND

         In 2007, Transamerica Occidental Life Insurance Company ("Transamerica") issued to the N Bergman Insurance Trust a life insurance policy ("the Policy") insuring the life of Nancy Bergman for $10, 000, 000. The original owner of the Policy was The N Bergman Insurance Trust dated December 18, 2006 ("the Trust"). That same year, Nachman Bergman, as trustee, signed an Application Amendment form as the "owner" of the Policy.[2]

         In 2009, Michael Krasnerman, the principal of Financial Life Services ("FLS"), began negotiating the purchase of the Policy from the Trust. In November of 2009, FLS entered into an agreement to purchase the Policy. After executing the purchase agreement, FLS learned that the Trust had not paid recent premiums, and also that Nancy Bergman's life expectancy was longer than had initially been reported by the Trust. FLS attempted to renegotiate with the Trust, but was unsuccessful.

         On October 4, 2010, FLS initiated a lawsuit against the Trust in the Eastern District of New York ("the EDNY Court") seeking a reduction of the purchase price or rescission of the agreement. On September 28, 2011, default judgment was entered against the Trust in the amount of $939, 365.28, plus post-judgment interest. Thereinafter, the EDNY Court authorized a sale of the Policy at auction. The Trust did not appeal the EDNY Court's order directing auction and sale. The case was closed on March 1, 2012.

         On February 6, 2012, the Trust filed for bankruptcy in the United States Bankruptcy Court for the Eastern District of New York ("the Bankruptcy Court"), temporarily staying the auction.[3] Ultimately, on June 6, 2012, the Bankruptcy Court lifted the stay and permitted the auction to proceed. At auction, FLS submitted the sole bid for $1, 194, 522 and eventually transferred the Policy to SPV, a Delaware limited liability company owned and controlled by a trust in South Dakota. On August 1, 2012, the Bankruptcy Court dismissed the Trust's bankruptcy petition upon a finding that the Trust had no assets remaining and no rights to the Policy. The Trust did not appeal the dismissal.

         Approximately one year later, on June 5, 2013, the Trust moved to reopen the bankruptcy proceeding and to vacate the Bankruptcy Court's June 6, 2012 lift stay order. On March 26, 2014, the Bankruptcy Court denied the Trust's motion to reopen. In its Order, the Bankruptcy Court highlighted the need for finality and predictability of judgments and found that the Trust had not presented newly discovered, credible evidence to warrant a motion to reopen.

         On April 6, 2014, Nancy Bergman died. Four days later, on April 10, 2014, the Trust appealed the Bankruptcy Court's March 26 Order. On May 1, 2014, the Trust moved to stay the order denying its motion to reopen the bankruptcy proceedings, and reinstate the stay of the sale. of the Policy, pending an appeal to the District Court. On May 13, 2014, the Bankruptcy Court issued a decision denying the Trust's May 1 request for a stay.[4]

         On May 29, 2014, SPV submitted a claim to Transamerica for benefits under the Policy. Transamerica declined to pay because it had received a competing, claim for the proceeds from Malka Silberman, the alleged trustee of the Trust.[5] On June 13, 2014, SPV filed suit in this Court against Transamerica alleging breach of contract and requesting payment of the Policy proceeds. On June 17, 2014, Transamerica filed an answer to SPV's complaint and instituted a third-party action for statutory interpleader asking this Court to determine SPV and the third-party defendants' rights to the policy proceeds.[6] The third-party complaint named Nachman Bergman, as trustee of the Trust, and Malka Silberman, as successor trustee of the Trust, as well as other entities.

         On August 8, 2014, SPV filed a motion for summary judgment. Doc. 19. In its motion, SPV argued, in part, that the doctrine of res judicata prevented any challenge to its ownership of the Policy because that issue had already been decided by the EDNY Court and the Bankruptcy Court, and as such, it was entitled to the proceeds. Doc. 19-20. On August 29, 2014, SPV, Life Trading Trust ("LTT"), FLS, and SPV II filed a motion for entry of default against Nachman Bergman and Malka Silberman, as trustees of the Trust. Doc. 26. On September 15, 2014, the trustees filed an answer, cross-claims, and counterclaims. Doc. 34. The Court struck that pleading as improper and directed the Clerk to enter default. See Docs. 34; 36-37. Thereinafter, SPV, LTT, FLS, and SPV II moved for default judgment against the trustees. Doc. 38. On October 24, 2014, the trustees filed a motion to set aside entry of default. Doc. 51.

         On March 30, 2015, this Court granted the trustees motion to set aside the default and denied SPV's motion for summary judgment "without prejudice to its right to renew the motion after discovery is completed." Doc. 78. On April 13, 2015, Nachman Bergman and Malka Silberman, as trustees, filed a cross-claim against SPV, and other entities, claiming that the parties wrongfully took ownership of the Policy. Doc. 80. On September 18, 2015, the Representative of the Estate of Nancy Bergman ("the Estate") filed a counterclaim and cross-claim against SPV and other entities asserting a claim to the Policy proceeds based on a New Jersey statute. Doc. 92. On October 22, 2015, SPV filed cross-claims against the Estate and Nachman Bergman and Malka Silberman, as trustees, for RICO, fraud, tortious interference, and unjust enrichment. Doc. 112. On December 1, 2015, SPV filed a motion for summary judgment dismissing the Estate's claim. Doc. 134-38. On April 14, 2016, the Court issued a Memorandum Opinion and Order granting SPV's motion for summary judgment and dismissing the claims to the policy proceeds asserted by the Estate.[7] Doc. 225. On May 4, 2016, SPV filed a motion to voluntarily dismiss cross-claims against the Estate. Doc. 235. The Court granted the motion to voluntarily dismiss cross-claims against the Estate without prejudice.[8] Doc. 444. On May 13, 2016, the Estate filed a motion for reconsideration asking the Court to "vacate and deny the Summary Judgment against its claims, or modify that ruling to allow for the claims of the Estate to be pursued in discovery and avoid a manifest injustice." Doc. 245. The Court denied the motion for reconsideration. Doc. 451.

         Thereinafter, on May 17, 2016, the Trust, through Malka Silberman, filed a motion to vacate the September 28, 2011 default judgment in the EDNY Court arguing that the Trust was never properly served and thus the default judgment was void.[9] The motion was referred to Magistrate Judge Anne Shields. On November 4, 2016, Judge Shields issued a Report and Recommendation recommending that the motion to vacate be denied because (1) the motion, pursuant to Rule 60(b)(4), was untimely, and (2) even if the motion was timely, it failed on the merits because "the Trust itself actively litigated the matter for years, as if such service was proper. No document indicated any lack of notice or opportunity to be heard. [Rather], the interests of the Trust were represented vigorously throughout this litigation." EDNY Court, No. 10-4499, Doc. 53.

         On January 17, 2017, SPV filed the current motion for summary judgment renewing, in part, its previous arguments that the Bankruptcy Court's dismissal and the EDNY Court's final judgment directing an auction of the policy were res judicata and barred any challenge to SPV's ownership of the Policy. Docs. 462-66. The Trust did not respond.[10] On February 2, 2017, the EDNY Court adopted the Judge Shields' Report and Recommendation in its entirety finding that "the Trust's participation in this action and in the Bankruptcy Court [were] properly attributable to the Trust."[11] EDNY Court, No. 10-4499, Doc. 60.

         LEGAL STANDARD

         Pursuant to Rule 56(a) of the Federal Rule of Civil Procedure, summary judgment is proper "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." FED. R. Civ. P. 56(a). "A party asserting that a fact cannot be . . . disputed must support the assertion" either by "citing to particular parts of materials in the record, " or by "showing that the materials cited do not establish the .. . presence of a genuine dispute[.]" Fed. R. Crv. P. 56(c)(1)(A)-(B). "The movant can also establish the absence of a disputed material fact by showing 'that an adverse party cannot produce admissible evidence ...


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